To be sure, the record offshore storage is a problem because with the front-end contango collapsing, DB warned just
several weeks ago when comparing the current level of floating storage
(157.3 million barrels) versus that in early February (126.6 million
barrels), that there may be an additional 31 million barrels of
inventory to be drawn down between now and the next inventory trough
over the next several months. It calculated that "depending on
the duration of drawdown (three months or six months) this could mean
anywhere from 165-330 kb/d of incremental supply."
But the photo above, meant to do DB's thesis justice, was nothing in comparisons to what Reuters would reveal today.
Because as ports struggle to cope with a global oil glut, huge
queues of supertankers have formed in some of the world's busiest sea
lanes, where some 200 million barrels of crude lies waiting to be loaded
or delivered, Reuters reports today.
The vessels, filled with oil worth around $7.5 billion at current market prices, would stretch for almost 40 km (25 miles) if formed up in one straight line.
Something not quite so theoretical, and yet almost identical taking
place right now, is shown in the photo below, which shows VLCC
supertankers traveling between India and Southeast Asia, courtesy of
Reuters.

And while the market is for now clearly ignoring the
unprecedented accumulation of oil in offshore storage, a bearish
indicator of just how much oil will hit markets if and when prices
continue rising or when collapsing contango makes it no longer economic
to hold for many it is an all too real daily existence. As Reuters reports,
one captain with more than 20 years at sea said his tanker had been
anchored off Qingdao in northeastern China since late March and was
unlikely to dock before the end of this week, a frustrating delay of
more than three weeks.
"We've stayed here a long time," he said, requesting anonymity
because he is not authorized to speak to the press, but added that
another kind of jam was helping to alleviate the boredom. "We have a
piano, drums, crew who play guitar – they are not professional but they
are coming good. We have more than 1,000 DVDs so there is no need to
watch the same one 20 times."
As we first showed last week in the photo above, the worst congestion
is in the Middle East, as ports struggle to cope with soaring output
available for export.
It's not just the Persian Gulf though: shocking sights can be seen in
in Asia, where many ports have not been upgraded in time to deal with
ravenous demand as consumers take advantage of cheap fuel.
"It's the worst I've seen at Qingdao," said a second
tanker captain waiting to offload at the world's seventh busiest port,
adding that his crew was killing time doing maintenance work.
Ralph Leszczynski, head of research at shipbroker Banchero Costa, in Singapore, said the snarl-up was "one of the worst tanker traffic jams in recent years".
The cause was "a perfect storm of red-hot demand from new entrant
refineries in China and port infrastructure in the Middle East and Latin
America that is unable to cope", he said.
Perhaps in retrospect it is not so much "ravenous demand", as soaring
supply with no place to deliver the oil to. According to ship tracking
data, 125 supertankers with the capacity to carry oil to supply
energy-hungry China for three weeks, are waiting in line at ports. The
combined daily cost is $6.25 million, based on current ship hire rates
of around $50,000-a-day. It is also why Swiss energy trading companies
such as Vitol and Trafigura have had a bumper year, one which has offset
their pure-play commodity exposure losses.
"It messes up port schedules, catering schedules, crew schedules and
the schedules of delivering the transported goods," said one shipping
logistics manager in Singapore. "It also raises the cost for pretty much
everyone involved."
For dealers, a month-long delay can turn a profitable trade into a
painful loss. "If you've bought 100,000 barrels of crude at $40 (a
barrel) that'll cost you $4 million," said one oil trader. "And if
you've calculated another 1.5 million bucks for a month's worth of
shipping, but you end up paying double that because your ship is stuck
in port congestion, then that can seriously mess up everything from your
schedule to your arbitrage profitability." In other words, for every
Vitol that is making a killing on the contango, someone is losing.
Here Reuters gets to the heart of the matter with the explanation why oil shipping lanes now look like parking lots:

"at the heart of the congestion is an unprecedented rise in global
oil production... as soaring output has pulled down oil prices by as
much as 70 percent since 2014. That has helped spur demand from China's
independent refiners, freed from government restrictions on imports just
last year and gorging on plentiful crude, putting extra pressure on
ports."

The unprecedented number of ships at sea filled with cargo and just
waiting for the signal to offload is also causing congestion between the
main producer and consumer hubs.
Almost all supertankers heading to Asia pass by Singapore or adjacent
facilities in southern Malaysia, the world's fuel station for tankers
and also a global refinery and ship maintenance hub.
Shipping data shows that some 50 supertankers are currently anchored
in or close to Singaporean waters for refueling, maintenance or waiting
to deliver crude to refineries or be used as floating storage.
This can be seen in the following Reuters photo of oil tankers lining up on the eastern coast of Singapore.

For sailors stuck a queue of anchored tankers, one of the biggest problems is simply wiling away the time, Reuters adds.
"Some of the ships are well-equipped for their crews, but many
aren't," said a Filipino sailor who left a very large crude carrier
(VLCC) in March after a voyage to China. "On my last one, we had no
regular internet ... only an old TV with a couple of old DVD movies. The
food is terrible and while waiting to offload we did pretty hard
maintenance work. The sort of stuff you can't do when the engine is
running."
Captain Alan Loynd, who spent more than 25 years at sea and is now a
marine consultant, said long port delays were rare, but could be tedious
and isolating when they happened.
And unlike in previous eras, having a couple of beers to break the monotony is usually out of the question.
"The chances of getting ashore are remote," he said. "A lot of ships are now dry, so there's no alcohol on board."
Unfortunately for Capitan Loynd and so many of his peers, the dry
period will last a lot longer because as even more supply is unleashed,
as land-based storage fills up and as every incremental producer rushes
to stash millions of barrels on whatever ships they can charter just to
let them float at sea.
Unless of course, the short-end contango flips and becomes a huge
cash burn for the owners of all that oil to keep all their not so
precious cargo seaborne. In that case those tens of millions of barrels
will promptly find their way to the market, which will then unleash an
unprecedented period of wholesale dumping as the liquidation scramble to
find a buyer at any price, pushes oil prices to fresh new lows.